The Accredited Investor Double Standard: SEC Roundup
Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of the nonprofit advocacy group Investor Choice Advocates Network.
On Sept. 30, the SEC released for comment a plan to broaden the categories of individuals who qualify as accredited investors. It is the clearest signal yet that the agency accepts what critics have argued for decades. A $1 million net worth or $200,000 income says little about whether an investor understands what they're buying.
That raises an awkward question. At what point does an agency stop defending a rule and start admitting it needs to change? And what happens to the people it pursued in the meantime?
In this episode, Morgan and Mark Hiraide sit down with Mona Shah, a New York immigration attorney and ICAN client. In November 2023, the SEC sued Shah and her boutique firm in the Southern District of New York over a series of EB-5 offerings. Against Shah, the agency alleged no fraud, no intent and no investor harm. Its only claim was a strict-liability Section 5 violation, based on the theory that some investors weren't accredited.
Before accepting investors, Shah's firm collected tax returns, bank statements, property records, source-of-funds documentation and independent verification. She told SEC staff under oath where those files were. The agency sued without reviewing them. Only after Shah moved for sanctions, about two years into the case, did the SEC work through the 72,000-page record. It still maintains that some investors didn't qualify.
The result: the SEC is defending the wealth-and-income thresholds as sound. It is pursuing an intermediary for not applying them strictly enough. And it is preparing to concede that those same thresholds need reform.
See the video for the discussion.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
